Jeddah one of world’s cheapest cities

Jeddah has been ranked as one of the top 10 cheapest cities in the world, according to the Worldwide Cost of Living (2011) survey conducted by the Economist Intelligence Unit (EIU). Karachi was the cheapest, while Tokyo was the most expensive. Jeddah came 128th.

Cities in the Middle East and North Africa make up the bulk of the cheapest locations, said the report.

According to the survey, Jeddah is, however, comparatively expensive to cities such as Tehran (130), Tunis (132), New Delhi (129) and Mumbai (131). The Sri Lankan capital Colombo, ranked 114, is among the top 20 cheapest locations.

Commenting on the survey results, Jarmo T. Kotilaine, chief economist at the National Commercial Bank, said: "The EIU's findings about Jeddah highlight the relative cost competitiveness of the Middle East in general as compared to more established business hubs in the West and in Asia. The low cost constitutes as important potential comparative advantages for the region as it seeks to attract more foreign direct investment. Jeddah's competitiveness is further boosted by its strategic location and access to a number of foreign markets through its international port and airport."

He said it must be remembered, however, that cheap does not automatically mean competitive. As the compilers of the index point out, low costs are typically associated with weakened currencies, low levels of development and, in some cases, price controls and subsidies on staple goods.

All of these factors either are or have been present in Jeddah in varying degrees. The most important among these challenges is the level of development. In the case of Jeddah, progress in terms of enhancing the city's standing in the eyes of investors will have to involve substantial additional investments in infrastructure at all levels, he said.

Similarly, the Saudi housing market in general is suffering from substantial shortages that translates into fragmentation, capacity constraints and higher costs. This may significantly limit the ability of business to capitalize on Jeddah's cost advantages. While Jeddah's potential advantages are real, more investment is required to properly capitalize on them, Kotilaine said.

Mohammad Ilays Khan, a Pakistani national who has lived in Jeddah for the last 24 years, agrees with the EIU ranking. He said Jeddah is no doubt cheaper to live in compared to other cities.

"Even when I go to Pakistan on vacation, I feel the pinch of high prices there. Things are very expensive there if you compare them with the Pakistani rupees," he added.

Khan, who works for a local foodstuff company, said food is very cheap in Saudi Arabia. Rents are lower than in some other cities in the region such as Dubai and Doha, he said.

"Anybody earning SR3,000 can live comfortably in Jeddah without much saving," he said.

Abdullah Khatib, an Indian who has been in Saudi Arabia since 1981, said thanks to the Saudi government’s efforts in controlling prices, prices of various commodities are quite affordable to both high and low salaried people in the Kingdom. "We talk about only high gold prices here but that depends on the international market and nothing to do with local government interference," he said.

Khatib said inflation in Saudi Arabia, currently running at 4.7 percent, is much lower than in India.

The most expensive city is Tokyo, with Singapore ranking at No. 10. Most other expensive cities in the top 10 have a familiar European flavor. They include Oslo, Paris, Zurich, Frankfurt and Geneva.

On the back of economic recovery, the UAE is expected to become a costlier place to live in, as per the findings of EIU.

Worldwide Cost of Living is a biannual EIU survey that compares over 400 individual prices across 160 products and services in 140 cities in 93 countries. More than 50,000 individual prices are collected in each survey round, carried out twice a year in March and September, and the results published in June and December. EIU researchers survey a range of stores: supermarkets, mid-priced stores and higher-priced specialty outlets. Prices reflect costs for more than 160 items — from food, toiletries and clothing to domestic help, transport and utility bills in each city.